Bhatia Coal Sales Ltd vs United India Insurance Co Ltd

ALLEGING deficiency in service on the part of opposite party-United India Insurance Company Limited in settling the insurance claim of the claimant-complainant company, in respect of the loss suffered by them due to damage to their stock of imported Indonesian Steaming Coal on 7th of November, 1997, M/s. Bhatia Coal Sales Ltd., a company registered under the Companies Act, 1956, has filed the present complaint, claiming a compensation of Rs. 27,41,032 (Rupees twenty-seven lakh forty-one thousand thirty-two only) towards the insurance claim along with interest at the rate of 21% per annum from the date of the claim till its actual payment and a sum of Rs. 2,00,000 (Rupees two lakh only) towards the compensation for the deficiency in service.

THE facts giving rise to the present complaint are in a narrow compass and may be noted thus. The complainant-company had imported 27,500 MT of Indonesian Steaming Coal in bulk from East Kalimantan Port, Indonesia to Navalakhi Port in Gujarat. The said consignment of coal was loaded on vessel M.V. Prabhudas under various Bills of Lading. For the safe transit of the coal from Indonesia and in order to secure itself against any losses and mishaps, the complainant company took out a Marine Transit Policy being Policy No. 191201/21/01/0045/97 dated 12th of September, 1997 for a sum of Rs. 2,30,00,000. In addition to the Marine Transit Policy, the terms and conditions attendant to the said policy were also subject to Institute Cargo Clause "C" (ICC "C"), Spontaneous Combustion, Institute Cargo War and SRCC Clause, which formed part of the said policy. The vessel containing the consignment in question arrived on the Indian shores on 2nd of October, 1997 and commenced discharging the coal on the same day. However, it was suspended on 5th of October, 1997 and finally discharge was completed by 8th of October, 1998. After the discharge, the cargo was shifted to nearby port plots with the help of dumpers and other earthmovers within the precincts/premises of the port area. On 7th of November, 1997 the steaming coal stacked in heaps of various heights suddenly and spontaneously began smoldering and soon was engulfed by fire. Several measures were taken to control the fire in order to minimize the loss. The opposite party-Insurance Company, on being informed, appointed a surveyor, namely, M/s. J.B. Boda Surveyors Pvt. Ltd., who after conducting the survey vide their report dated 28th of May, 1999 quantified the loss of coal at 1674.800 MT due to the peril of spontaneous combustion. Despite the said report of the surveyor, the opposite party-Insurance Company vide their letter dated 19th of November, 1999 repudiated the claim by stating the following reasons: "This has reference to your above claim preferred on us. While going through the policy documents and proof of documents submitted in support of your claim, it is observed that the policy was issued covering the consignment of Coal from East Kalimantan (Port) to Navlakhi Port Gujarat under ICC C + Spontaneous Combustion and the consignment was unloaded and delivered to your Agent on 7.10.1997 and same was placed on Coal Plots. The consignment was reported damaged by Spontaneous Combustion on 7.11.1997 i.e., one month after the date of delivery. Since the consignment was delivered at the destination named in the policy the cover granted under the policy ceases as per the Transit Clause provided under the ICC "C", in view of the above the subject claim has been repudiated by the Competent Authority which please note."

AGGRIEVED by the said unjustified and arbitrary repudiation of the claim, the complainant-company has filed the present complaint seeking the above reliefs.

ON being issued notice on the complaint, the opposite party-Insurance Company has resisted the complaint by filing written version, raising preliminary objections in regard to maintainability of the claim in absence of any cause of action for the same. On merits, the facts in regard to issuance of the Marine Transit Policy, containing the Institute Cargo Clause "C" (ICC "C"), Spontaneous Combustion, Institute Cargo War and SRCC Clause, are not disputed. The factum of the peril on 7th of November, 1997 is also not disputed. The repudiation of the insurance claim on the ground that the peril had taken place after one month of the date of delivery is sought to be justified and maintained. Any deficiency on part of the opposite party-Insurance Company in repudiating the claim is denied. Liability to pay any compensation, much less the compensation claimed in the complaint, is specifically denied.

IN the rejoinder, the complainant has controverted the objections and pleas raised in the written version filed by the opposite party-Insurance Company and has generally reiterated the averments already made in the complaint.

IN order to substantiate their respective cases, the parties have largely relied upon the documentary evidences, besides supporting evidences. From the side of the complainant, affidavit of Mr. J.K. Jain, General Manager of the complainant-company, has been filed while no affidavit in evidence has been filed on behalf of the opposite party-Insurance Company.

WE have carefully considered the entire facts and circumstances of the case, the evidence and the material brought on record and have heard Mr. Shambhu Prasad Singh, Senior Advocate, with Mr. Adit S. Pujari, Advocate on behalf of the complainant-company and Mr. P.K. Seth, Advocate appearing on behalf of the opposite party-Insurance Company and have given our thoughtful consideration to their respective submissions.

GOING by the reasons set up by the opposite party-Insurance Company for repudiating the claim of the complainant, the only question, answer to which will decide the fate of this complaint, is as to whether on the given facts and circumstances it can be said that the consignment of coal was delivered to the complainant on 7th of October, 1997, as per the specific averment made in the letter of repudiation. According to the complainant, though the discharge of the consignment had taken place between 2nd of October, 1997 to 8th of October, 1997, still the delivery of the entire consignment was not taken either on that date or immediately thereafter and the delivery was effected on different dates uptil the 2nd of December, 1997. It is also submitted that the customs duty required to be paid under the provisions of the Customs Act, 1962 was also paid in stages and not in one go and, therefore, the contention of the opposite party-Insurance Company that the delivery of the entire consignment was effected on 7th of October, 1997 is palpably incorrect.

IN support of their contention that the delivery of the entire consignment was not effected on 7th of October, 1997, the learned Counsel for the complainant has heavily relied upon a Supreme Court decision in the case of Garden Silk Mills Ltd. and Another v. Union of India and Others, X (1999) SLT 8=(1999) 8 SCC 744. In that case, the Supreme Court had an occasion to consider the question of difference between ''delivery'' and ''discharge''. After referring to the provisions of the Indian Customs Act, 1962 and various other prepositions, the Supreme Court held as under: "10......It appears to us that the word ''delivery'' must necessarily mean the point of time when the goods can be physically delivered to the importer. In other words, "delivery" and ''discharge'' are not synonymous. As we shall presently see, merely by the shipper discharging the goods at the port of import does not ipso facto give the importer a right to take the delivery thereof. 11. Chapter VI of the Act contains the provisions relating to conveyances carrying imported or exported goods. Chapter VII of the Act contains provisions regarding the clearance of imported goods and the export goods. Reading the provisions contained in the said chapters, it becomes apparent that all goods carried by vessel or aircraft entering from any place outside India have to be landed at a customs port or customs airport and that too with the permission of the Customs Officer (Section 29). 12. The import manifest of the vessel is required to be delivered to the Customs Officer in terms of Section 30. Unloading of imported goods can take place only after the import manifest has been delivered and an order permitting entry inwards of the vessel has been given by the Customs Officer in terms of Section 31. Section 32 provides that unloading of only those goods is permitted as are mentioned in the import manifest The goods are to be unloaded as per Section 33 only at the place which is approved for that purpose and the same cannot be unloaded except under the supervision of the Customs Officer (Section 34). 13. All imported goods unloaded in a customs area are required to remain under the Customs Authorities until they are cleared for home consumption or are warehoused or are transhipped (Section 45). The goods can be cleared by the importer only after, as provided by Section 46, the importer files a bill of entry for home consumption or warehousing pursuant to which clearance of goods is granted under Section 47 by the Customs Officer. This clearance is given after the officer is inter alia, satisfied that the importer has paid the import duty assessed on the imported goods. 14. The aforesaid provisions of the Act, therefore, clearly show that after the imported goods are discharged from the vessel at the wharf the importer cannot immediately take delivery thereof. The imported goods remain in the custody of the Port Trust Authorities till they are, inter alia, cleared for home consumption. This being the position the goods cannot be cleared and delivery taken without their being valued and assessed and, thereafter, duty being paid. Section 14 of the Act provides that the value of the goods shall be deemed to be the price of the goods for the delivery at the time and place of importation in the course of international trade. The value has to be determined with relation to the time when physical delivery to the importer can take place. Physical delivery can take place only after the bill of entry, inter alia, for home consumption is filed and it is the value at that point of time which would be relevant. It is evident that there normally will be some lapse of time between the time when the shipper discharges the goods and the time when the bill of entry is filed. The landing charges, which are imposed at or after the time of the discharge of the goods and prior to the clearance being granted under Section 47 of the Act, necessarily have to be an element which have to be taken into account in determining the value thereof for the purpose of assessing the customs duty which would be chargeable."

BEARING in mind the legal position, which emerges out from the above decision of the Supreme Court, we must find out as to whether in the present case, the delivery of consignment was effected on 7th of October, 1997. In this regard, a reference to the observations and findings made by the surveyor, M/s. J.B. Boda Surveyors Pvt. Ltd., in their report dated 28th of May, 1999 are quite relevant and throw much light on the question as to when the delivery of the consignment can be said to have been effected in the present case. In the said report, the above named surveyor has observed as under: "The discharge of the cargo from the vessel was conducted with the help of cranes and barges at anchorage. After unloading the material on the wharf from the barges it was shifted to the nearby port plots with the help of dumpers and other earthmovers within the Port area. From this plot the trucks were loaded under the supervision of the consignees and the clearing agents representatives. Recording of the truck weights was reportedly done at the time of removal of cargo and the final delivery from the Port plots. The details of receipts are as under: B/L No. B/E No. / Qty. Date of and Date Date Duty Paid 1, 2, 3/17.9.97 F/52/23.10.97 6,000 24.10.97 4, 17/17.9.97 F/53/23.10.97 2,900 24.10.97 5, 6, 7/17.9.97 F/58/13.11.97 6,000 19.11.97 8 and 9/17.9.97 F/61/2.12.97 4,000 8.12.97 10/17.9.97 F/62/212.97 2,000 8.12.97 11,16,18/17.9.97 F/42/6.10.97 6,600 10.10.97 27,500 Initially the Insured''s sister concern started lifting the material by supplying it to various parties. Accordingly, their bill of entry was filed with the custom authorities."

A bare perusal of the above table, which is based on the information gathered from the documents produced before the surveyor, would show that out of the total quantity of 27500 MT of Steaming Coal, duty had been paid in respect of 6600 MT and 8900 MT on 10th of October, 1997 and 24th of October, 1997 respectively. The duty in respect of the remaining 12000 MT of Steaming Coal was paid between 19th of November, 1997 and 8th of December, 1997. This would clearly mean that at best the duty in respect of 15500 MT (i.e. 6600 MT + 8900 MT) had been paid prior to the date of peril and the duty in respect of the remaining quantity of 12000 MT (i.e. 27500 MT - 15500 MT) was paid subsequent to the date of peril i.e. 7th of November, 1997.

GOING by the provisions of Customs Act, 1962 and the legal position and its interpretation given by the Supreme Court in the above referred decision, we have no manner of doubt that at least the quantity of 12000 MT of Steaming Coal was still lying in the control and premises of the Customs Authorities at their warehouse. Whether the warehouse was an open warehouse/yard or a closed one, is not the question which should come in our way in taking the above view. We are, therefore, of the clear opinion that at least the delivery of 12000 MT of Steaming Coal was not effected to the complainant before the date of peril.

THE Surveyor has clearly observed that the damage to the tune of 1674.800 MT of coal had taken place due to the spontaneous combustion, which must have been caused from the remaining undelivered quantity of the coal as on 7th of November, 1997. The complainant has claimed indemnification only in respect of the said quantity of 1674.800 MT only and no more. Though the surveyor has quantified the quantity of the loss/damage to the steaming coal but did not quantify the net loss in terms of money. For this purpose, our attention has been invited to the claim form dated 5th of October, 1998, wherein the complainant has made a claim of Rs. 20,31,532 as the price of the damaged coal calculated at the rate of Rs. 1,213 per MT coal. Besides that it has claimed certain further amounts on account of watering charges, stacking charges, coal spreading charges and surveyor fees. Since the claim at the rate of Rs. 1,213 per MT coal has been made in accordance with the invoice, we are prepared to accept the same as the correct price of the coal and determine the compensation on the basis of that price. However, since the surveyor, M/s. JB Boda Surveyors Pvt. Ltd., has observed that even the salvage of the damaged coal/residual could fetch a value at the rate of Rs. 180 per MT, we must essentially deduct this salvage value from the amount of Rs. 20,31,532, which after deduction would come to Rs. 17,30,068.

SO far as the claim towards watering charges, stacking charges, coal spreading charges and surveyor fees is concerned, the complainant has not led any evidence on record to support their claim that those expenses were actually incurred by them. However, presuming that some amount must have been spent on these counts, we are inclined to grant a lump sum compensation of Rs. 1,00,000 under that head. Adding this amount to the value of the damaged goods, the total claim of the complainant comes to Rs. 18,30,068.

IN view of the above, we hold that the opposite party-Insurance Company ought to have settled the claim of the complainant at least in the sum of Rs. 18,30,068 and by not doing so and by repudiating the claim unjustifiably, they will be deemed to have committed deficiency in service. Since the amount was not paid to the complainant within reasonable time, the complainant is entitled to be compensated by way of interest on the said amount. In our view, it would meet the ends of justice if we award interest at the rate of 9% per annum w.e.f. 1st of May, 1999 (i.e. about six months after the date of making the claim i.e. 8th of October, 1998) till its payment.

IN the facts and circumstances, we allow the complaint in the manner indicated above, leaving the parties to bear their own costs. The awarded amount shall be paid within six weeks, failing which it shall carry interest @ 12% per annum from the date of default. Complaint allowed.